What if you went to Las Vegas, sat down at your favorite slot machine, and very time you dropped in $1, you got back $2? I'll bet you would never leave!

This is the holy grail. Great returns without any risk.

It doesn't work that way in Las Vegas. Why do you think investing is any different?

The foundation of returns is risk. The higher the risk, the greater the potential for returns -- or for losses.

You can achieve returns without risk. However, to do so you need to invest in what are known as "risk-free" investments. These include FDIC-insured Certificates of Deposits and Treasury Bills.

The problem with "risk-free" investments is that they generate relatively low returns. The historical returns of Treasury Bills is 3.7%. After inflation and taxes, there is little profit remaining.

Most people want higher returns than they can get with "risk-free" investments. To do so, you need to invest in the domestic or foreign stock markets (preferably both) and in bonds, which can vary in terms of safety.

In the ideal situation, your portfolio will reward you for the risk you take, but this is not always the case. For example, if you invest in individual stocks, you may have twice (or more) the risk of investing in a mutual fund with a similar benchmark, but your expected return will be the same. This is a bad deal. You are taking on much more risk for the same expected return.

Until the recent meltdown, there was little talk of risk. Most brokers and advisors don't understand risk, much less know how to calculate it.

Here is a useful guideline: When you hear about outsized returns, ask about outsized risk.

That's what rich people do.

Dan Solin is the author of The Smartest Investment Book You'll Ever Read (Perigee Books, 2006) and The Smartest 401(k) Book You'll Ever Read (Perigee Books, 2008).